Latest Stories

Hiring optimism up among U.S. finance professionals

U.S. companies expect to make more money, and spend more of it, in
the year ahead—and that could translate into more jobs. At the same
time, finance executives’ outlook of the overall economy has cooled.

Those are the key takeaways from the third-quarter Business &
Industry Economic Outlook Survey, released Tuesday by the AICPA.

The quarterly survey takes the temperature of more than 1,200
finance professionals across industries, gauging their outlook in nine
key areas: U.S. economic optimism, organization optimism, expansion
plans, revenue, profits, employment, IT spending, training and
development, and other capital spending.

Those nine indicators make up the CPA Outlook Index (CPAOI), which
matched a post-recession high of 69 in the most recent survey. That’s
even with last quarter, when optimism about the U.S. economic outlook
and the fortunes of respondents’ own companies surged. A score above
50 indicates a positive outlook.

Hiring on the rise?

Companies plan to ramp up hiring, according to the survey. About
one-third of companies (34%) said they have too few employees. Also,
15% plan to hire, up from 9% a year ago. That’s a post-recession high
for the survey. Small businesses in particular are more inclined to
hire; 20% said in the most recent quarter that they are reluctant to
hire, compared with 25% who were reluctant to add staff in the
previous quarter.

Overall, companies plan to grow their staffing 1.3% in the next 12
months, compared with 0.8% a year ago.

Revenue outlook strong

The most recent CPAOI was propped up by improved attitudes about
revenue—and how that money might be spent. The outlook for revenue hit
its highest point since the first quarter of 2012. Meanwhile, optimism
surrounding expansion plans and other capital spending—and
profits—climbed to their highest levels in the past year. The outlook
for IT spending also remained strong.

The outlook in those categories was tempered by optimism about the
overall U.S. economy, which dipped from 66 to 62—the biggest
quarter-to-quarter drop of any of the nine indicators. Organization
optimism also dipped by a point compared with the previous quarter, as
did the outlook for training and development expenditures. Those
declines, driven in part by concerns about health care reform and
political gridlock, kept the index from eclipsing 70 points—a mark
last achieved in 2007.

The short-term story obscures the tale of an otherwise upbeat year.
On a year-over-year basis, sentiment improved in all nine sectors of
the index, including a 21-point increase in U.S. economic optimism and
a seven-point gain in company optimism.

Cautiously optimistic

Roth Distributing, which supplies high-end household appliances to
dealers, retailers, and homebuilders in 14 central US states, projects
double-digit revenue growth through the end of 2014. If that pace
keeps up, Roth’s ranks will likely grow, according to Gary Stoker,
CPA, controller and treasurer of the company.

“We’re cautiously optimistic about the future,” Stoker said. “We’re
confident based on our strategies, and we feel very good about our
business in the Midwest. Ultimately, our sales are going to mirror
what happens in the economy in the U.S.”

Revenue for Roth was $92 million in 2007 before dipping to $51
million by 2011, following the U.S. housing bust. The company has
rebounded, however, with revenue for this fiscal year projected to be
$61 million.

Stoker, who took part in the survey, is concerned about the impact
on the business of health care changes and tax reform in Washington.
Other finance professionals cite regulatory requirements and changes
as the top challenge for the second consecutive quarter. Domestic
economic conditions are the No. 2 challenge, ahead of employee and
benefits costs.

Global concerns linger

David Kvendru, CPA, CGMA, is also feeling better about his company.
Kvendru, who is CFO of the San Diego Association of Realtors (SDAR),
said the housing market’s rebound has helped increase membership to
near pre-recession highs. A year ago, the SDAR had about 10,200
registered real estate agents; as of late August this year, that
number had grown to 10,700.

He expects membership to grow to 11,000, which he hasn’t seen since
shortly after joining the organization in 2005. “I’m feeling the same
energy that I felt in 2006,” Kvendru said.

Kvendru is moderately optimistic about the U.S. economy, despite
potential snags with the implementation of the Patient Protection and
Affordable Care Act. Some of the main provisions, including the
employer mandate, were scheduled to take effect on Jan. 1 but were
delayed a year. He also wonders about the global economy’s effect on
the United States.

“I think the U.S. economy is going to be just fine, as long as
Europe or some of the BRICS don’t drag us down,” said Kvendru,
referring to the nations of Brazil, Russia, India, China, and South Africa.

The coming quarters will be telling for Kvendru and Stoker. The
return of the U.S. housing market has buoyed economic optimism in
recent quarters. Optimism in the real estate and construction
industries each climbed to two-year highs in the second-quarter
Business & Industry Economic Outlook Survey.

But the climb stopped in the third quarter. Optimism in the
construction industry leveled off at 59%. And real estate dropped four
points to 56—the biggest decline in nine months.

Other highlights from the survey:

Companies expect revenue to grow 3.3% in the next 12 months
and profit 2.5% in the same period, compared with 2.6% projected
revenue growth and 2.2% projected profit growth a year ago. Both
indicators grew for the third consecutive quarter.

Companies are less likely to hold on to cash. The number
indicating they had about the right amount of liquidity fell from
44% a year ago to 42%. Also, the number planning to deploy cash grew
from 12% in the third quarter of 2012 to 16% this quarter.

The retail sector had the highest industry optimism, at 62%, up
from 45% a year ago. Wholesale trade optimism rose from 41% a year
ago to 58%.

The CPAOI

Each component of the CPAOI is calculated by taking the percentage
of respondents who indicated that their opinion or expectation for the
metric is positive or increasing, and adding to that half of the
percentage of respondents indicating a neutral or no-change response.
A reading above 50 indicates a generally positive outlook with
increasing activity. A reading below 50 indicates a generally negative
outlook with decreasing activity.

For example, if 60% of respondents indicate an optimistic or very
optimistic view, and 20% express a neutral view, the calculation of
the component indicator would be 70 (60% + [0.5 × 20%]).